Your state of mind when you take risk is as important as the risk.

I could probably write or talk about risk for days.  As a trader you have to be comfortable with risk.  This often means redefining it. Part of redefining it is knowing your state of mind when you take risk is as important as the risk.  There are times when the risk looks different because of emotion or the traders current situation.  The more often you take risk from a position of the strength the more often you will be able to accurately assess it and take full advantage.  Take advantage of the risks you take.

I see the states of mind as the following:

Have to take  risk

Having to trade is dangerous.  If you are trying to trade yourself out of a hole or to be able to eat that day, the way you view risk changes.  If eating your next meal or being right is more important than being inside your risk parameters and trading plan you will eventually be in trouble.  The good news is that you should have been able to see this coming for awhile or once you recover you will have another chance to learn it. Do not get me wrong, you need to expect to win and you need to be hungry to win.  Those two things are prerequisites for trading successful.  But having to win and starving are very different.

Want to take risk

Just because the market is open does not mean it is necessary to trade.   This is hard especially if you have had success in another part of your life or you see others making money.  Sitting on your hands is hard but try it once. You will realize after enough time that it is easier to watch.  If you do it right, your next opportunity should be a better one.

Need to take risk

Needing to take a risk is best state of mind for me.  When I did the work and the market is acting in a way that makes it impossible to not take risk.  It is more uncomfortable to not take a risk than take one.  This is the best state of mind to take risk but they are also harder to recognize. Recognizing this state of mind will be aided by regularly taking your mental inventory.  The times it occurs is less frequent and it is harder to recognize from the outside of a trade (while not in a trade, this is my experience yours might be different).  When it all comes together you will know.

At certain times of the day or career you will be in all of these states of mind.  Always risking from a position of strength can be a lot to ask.  Knowing your state of mind can be enough to offset the extra risks.

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